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There is a wide variety of technical analysis tools available today (indicators, oscillators, indices, ratios, charting patterns). The problem with them is that they are designed to look backward but not forward. Trading Center using trading experience on stocks and indices, dated back in 1997, plus an innovative researching framework, formulates a new trading indicator called TCI. Trading Center Indicator (TCI) can be used to analyze any financial traded asset both backwards and forwards.
Tip: “Looking back to identify what to buy –looking forward to identify when to buy it”
The New Version 1.2 of TCI at Trading Center
Since the first creation of the TCI model (1999-2000) the formulas incorporated are continuously evolving. The reason is that the global economy and the incurred market conditions are evolving and thus every trading system must evolve too in order to adapt these new market developments. For example when the market volatility suddenly increases, trading systems must re-set their time frames to shorter periods and leverage to lower ratios.
What really distinguishes the new version of TCI
What really distinguishes the new version of TCI compared to old versions is the way time frames are now set. Time frames to the new version of TCI are defined according to the Fibonacci sequence of numbers. This new approach is capable of further optimizing the accuracy of TCI results.
Why is Fibonacci Sequence of Numbers Important
The Fibonacci Sequence of numbers is based on the Golden Ratio (Phi or Φ) which is equal to about 1.618 (1.61803398874989484820...). This Golden Ratio can be found everywhere in our universe but also in earth's nature and even as concerns our body’s proportions. Financial Markets has long accepted the importance of this Sequence of Numbers and thus popular technical analysis tools such is the Fibonacci Retracement can be found everywhere nowadays.
TCI Long & TCI Short
New TCI signals are based on two separate Indicators, TCI Long and TCI Short. The reason is that both short-term and mid-term are important in order we identify if a certain asset or a certain market is overbought or oversold. Furthermore TCI Short enables optimizing time entry / exit points. As it is already mentioned, TCI can be set up forwards and define optimal future entry or exit in any financial asset or market. Here is an example of TCI Long and TCI Short indications. The market is Forex and the asset is EURUSD. If you take a close look you can see that when TCI Long reaches the level +40% the market tanks. That means that when TCI Long reaches the level +40% the hidden supply shows up closes its positions in a hurry (possible high-profitable positions).
Chart: TCI Long and TCI short on EURUSD 2009-2013
Defining the Market Pattern using Technical Analysis and Money Management
Trading systems such is TCI can be used to forecast the natural course of market action. This can be titled as "Defining the Market Pattern using Technical Analysis". Important macroeconomic developments or unexpected news may change the root of technical analysis. So traders must have that always on their mind and avoid heavy exposure and high capital leverage.
Tip: "Forecasting Systems are great but they can be profitable only when they accompanied by the right Money Management Systems"
TCI Formula (2 Moving Averages Combined)
TCI takes into account several daily activity numbers as opening, high and low price and trading volume / value. TCI is formulated by two moving averages which incorporate all the above trading activity data. Moving Average (1) is producing a daily valuation while Moving Average (2) is correcting the results. Each moving average is measured separately.
Looking Backward and Forward
The two moving averages which form the basic TCI structure can be setup to a desired backward or forward time frame.
1) When TCI is set backwards then overbought / oversold levels may be identified.
2) When TCI is set forward then the best timing to execute trades may be forecasted.
3 Questions that can be answered using TCI
TCI answers three questions:
1) Does a financial traded asset reached technically overbought / oversold price levels?
2) How much is that financial asset overbought / oversold, and should that affect my trading decisions?
3) When the perfect timing to trade the market will occur?
Tip: “You can buy, you can sell or you can wait for the right timing to do both”
What Can TCI Forecast
Using TCI on a financial traded asset, overbought / oversold levels may be indicated, but at the same time, the ‘theoretical’ perfect time to execute trades. It is possible to forecast also future trend reversals. But actually it can do much more. Using TCI it is possible to compare stocks, indices, currency pairs and commodities. Additionally, by analyzing historical results it is possible to draw unique charts.
Testing TCI -Graphical Implementation
“Using a long-run TCI chart to evaluate Nasdaq Composite Index historical behavior”
In the chart below, TCI indicator is implied on Nasdaq Composite from June 4, 1982 to June 4, 2012.
Chart: The First version of TCI on Nasdaq
Some quick observations on the long-run TCI Nasdaq Chart:
1) When TCI is reaching the level of 40% the market is dangerously overbought
2) When TCI is reaching the level of -55% the market is absolutely oversold
3) After the indicated by TCI Overbought and Oversold levels we get significant trend reversal with enormous returns more than 50%
Testing TCI Historical Results / Conclusions
TCI has been heavily tested through out the last decade on various Stock Indices and other financial traded instruments and the results are absolutely interesting and sometimes significant accurate.
Here are some conclusions concerning TCI results
1) TCI is much more reliable when used upon Stock Indices, Forex and Commodities than when it is used upon particular stocks.
2) TCI is much more reliable when is used on high volume activity financial assets than on low volume activity financial assets.
3) In many cases, the targeted trend reversal date was missed by one day. Most of these times the reversal was made intraday instead of the next day that was originally targeted.
Are TCI analysis results offered for free?
Yes TCI results are offered for free, and for now, there is no plan to sell results.
Does TCI make mistakes?
Of course it makes mistakes. Surprising news is the common cause for false signaling. Surprising news is a common phenomenon in the financial markets and it is able to highly disturb any technical analysis forecast. So any given forecast doesn’t include unexpected news and similar events.
Tip: “But sometimes what looks like a great surprise is not a surprise at all”
TCI SIGNALS ARE POSTED FOR FREE ON TRADING CENTER
From time to time you will be able to find TCI signals regarding Forex, Commodities, Stocks and Indices. We are particularly interested on EUR/USD and on GBP/USD as concerns Forex and Dow Jones Industrial and Nasdaq as concerns Global Indices. As concerns commodity trading we are interested in the price of Gold.
Why we focus almost only on popular assets? Because popularity leads to liquidity and to competition (among brokers), and competition brings narrow spreads. Furthermore the popularity of a financial asset means also wider and better information.
Here is the TCI calendar of Free Signals:
Trading Center Learning section provides the essential information concerning the most commonly used technical analysis tools.
Check Also »TCI+ Forex Technical Analysis
■ Giorgos Protonotarios, Financial Analyst